The Center for European Economic Research said its May economic expectations index for Germany fell to 45.8 from 53.0 in April. Coupled with that the German 10-year government bonds dropped. The DAX suffers a sharp drop in early May from which it is just recovering.
All of these are early signs that German opposition to a Greek bailout may have been reasonable. The chance of success for the effort has already been questioned in a some quarters. One of these is by the head of German’s largest financial firm, Joseph Ackermann of Deutsche Bank.
If Germany’s ability to raise capital or the business confidence in the nation continues to falter, there could still be a violent backlash to the role that the country played to salvage the Eurozone. The process has been a failure so far as the euro has stayed under pressure and worries about a spread of the panic to Spain and Portugal have grown. The region’s nearly $1 trillion support plan for Eurozone nations and ECB purchases of paper meant to hold up the euro’s value and drop yields on sovereign debt have only been modestly successful. The market still figures that the bailout of Greece will be short-lived in terms of effectiveness.
Germany’s suspected that their leader’s actions to help neighbors would be bad for business. Now they know it for certain.
Douglas A. McIntyre
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